Although the group’s report did not include any call for imposing additional punitive measures on Lebanon, it kept the country under tight surveillance pending the completion of reforms. The FATF stressed the need for Lebanon to continue implementing a set of basic measures, most notably conducting updated and accurate assessments of the risks of terrorist financing and money laundering, and adopting effective policies to reduce these risks. It also called for strengthening the implementation of targeted financial sanctions, intensifying risk-based oversight of non-financial sectors and high-risk non-profit organizations, as well as strengthening mechanisms for responding to requests for mutual legal assistance, extradition of wanted persons and recovery of assets, and applying deterrent penalties against violators.
In a reading of the results of the meeting, economic researcher and banking risk expert Dr. Mohamed Fahili explained that the group decided to postpone the comprehensive assessment of Lebanon’s situation until late 2026 due to the security conditions related to the war and its repercussions, while maintaining the gray classification, and continuing enhanced supervision in the field of combating money laundering and terrorist financing.
Aside from the technical aspects related to the standards of combating money laundering and terrorist financing, Fahili reads the decision from a broader angle, considering that the importance of the FATF entitlement goes beyond the issue of technical compliance to constitute a test of Lebanon’s ability to restore local and international confidence in its financial, monetary and judicial institutions. “The international financial community not only monitors monetary indicators, but also evaluates the effectiveness of supervision and the transparency of financial operations, and the extent of the institutions’ ability to enforce the laws. Accordingly, keeping Lebanon on the gray list reflects, in In essence, the continuing crisis of confidence in the Lebanese financial system and state institutions.
Fahili pointed out in an interview with “Lebanon 24” that “the decision was not issued because Lebanese banks failed to identify their customers or implement compliance rules, but rather because the Lebanese state as a whole failed to prove the effectiveness of its national system to combat money laundering and terrorist financing.”
Fahili points out that the monetary stability achieved in recent years remains fragile unless accompanied by comprehensive financial and banking reforms, foremost of which is addressing the deposit file and restructuring the banking sector.
In its report, the group called on Lebanon to demonstrate a sustained increase in investigations, prosecutions and judicial rulings related to money laundering crimes, commensurate with the level of risk, as well as strengthen the confiscation of illicit cross-border transfers, and ensure the immediate application of targeted financial sanctions, especially on non-bank financial institutions. Fahili attributes part of the group’s stringency in judicial and supervisory issues to the expansion of the cash economy and the shadow economy in Lebanon, “as the decline in confidence in banks resulted in the expansion of financial activities outside regular channels, which made monitoring and tracking of funds difficult, and raised the level of risks associated with money laundering and illicit activities.” In this context, Fahili pointed out that the main weaknesses that are still being monitored relate to the effectiveness of judicial prosecutions, recovering assets, and identifying the true beneficiaries of companies. He stressed that dealing with the monetary economy as the main problem may lead to an inaccurate diagnosis of the crisis, “as it is a direct result of the loss of confidence in the state and its institutions, and not a cause of it.”
He concludes that the real challenge does not lie in obtaining a positive evaluation from the FATF in the near future, but rather in the ability of the Lebanese state to implement structural reforms that rebuild confidence in the financial, judicial and supervisory institutions.
Thus, it seems that Lebanon’s remaining on the gray list does not constitute a punishment in itself as much as it represents a continuous indication of the extent of the reforms that are still pending, as exiting this circle remains dependent on the state’s ability to restore confidence and implement comprehensive reforms that go beyond the technical framework to the deep structural ones, while the possibility of moving the classification from gray to black remains present, in the event of continued faltering.
